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Doesn't Anyone Disagree With Warren Buffett About Taxes?

Warren Buffett used one of journalism’s most effective platforms this morning, the op-ed page of The New York Times, to renew his call for higher taxes on the rich. Buffett wants Congress to eliminate the Bush tax cuts for Americans with incomes of $500,000 and up (higher than Pres. Obama’s proposal of $250,000). He also wants to impose a minimum tax rate of 30% on incomes of $1 million to $10 million, and a 35% rate on incomes above that. Buffett’s argument in the Times piece: savvy investors will not pass up an opportunity to put their money into lucrative ventures just because their earnings will be taxed at a higher rate. He points to his own actions, back in the 1950s, when marginal rates on dividends reached 91%. “I sold securities and did pretty well,” he writes. The idea that higher tax rates will stifle investment and productivity, he says, is bunk. “The ultrarich, including me, will forever pursue investment opportunities.”

We’ve been waiting all day to read some negative commentary about Buffett’s proposals, but instead, there has been a stream of praise. Henry Blodget penned a piece on Yahoo Finance entitled, “Why Warren Buffett Is Right About Raising Taxes on the Rich.” Blodget writes that spending cuts are also necessary if the deficit is to be effectively tackled, but “we have to raise taxes” as well, and the highest-earning Americans are the best place to start. Not surprisingly, Eliot Spitzer agrees with Blodget. Writing on Slate, he says we should all “listen to the wisest man in America” and carry out his sensible tax plan.

Perhaps it’s no surprise that left-leaning commentators are cheering for Buffett. But you would think that a conservative outlet like The National Review would blast any tax-hike proposal. Instead the Review has a mild piece by Jim Geraghty that praises Buffett for noting that Pres. Obama’s proposal to raise taxes on families making $250,000 and up would ensnare some middle-income taxpayers in parts of the country where the cost of living is high. Geraghty also points out that many states already impose their own “millionaire” tax on people earning more than, say, $175,000 in Hawaii, where they pay an 11% state income tax rate or a 9.9% rate on income over $125,000 in Oregon. But that’s all Geraghty says. The Review, it seems, doesn’t think Buffett’s proposal is such a bad idea.

On the American Enterprise Institute’s blog, business and economics writer James Pethokoukis quibbles with Buffett’s calculations of potential revenue raised from taxes versus spending cuts. Buffett says that the government should be able to bring in 18.5% of G.D.P. through taxes, and spend 21%. Pethokoukis insists that the Congressional Budget Office has already said the government can raise 18.5% of G.D.P. by 2022 without raising rates, simply by waiting for the economy to recover. As an aside, he writes that Buffett’s proposed tax hike would be “anti growth,” and goes on to make the familiar conservative argument that spending cuts are more effective than tax hikes, and note that in a weak economy, it is unwise to raise taxes. Nothing new there.

Buffett also invites some mild criticism from Harvard economist and former Mitt Romney economic advisor Greg Mankiw, who writes on his Wall Street Journal blog that Buffett has failed to come clean about his own tax avoidance strategies. If Congress were to implement Buffett’s proposal, writes Mankiw, Buffett himself would be largely unaffected, for the following reasons: His company, Berkshire Hathaway, doesn’t pay dividends, so his investors, including himself, don’t immediately pay income tax on gains. Also because he’s a long-term investor, he rarely sells and realizes a taxable capital gain. Further, he gives so much to charity, he gets big deductions on the full market value of the stocks he gives away, most of which are unrealized and therefore untaxed capital gains. Finally, when he dies, his heirs will enjoy a stepped-up basis and the government will never collect any revenue from all those unrealized capital gains. Again, none of these points are new or surprising.

Perhaps the criticism is muted because this is not the first time Buffett has made a plea for raising taxes on the wealthy. He made his famous “Buffett Rule” proposal to raise the income tax on those making more than $1 million to 30%, early last year. Or maybe the lack of criticism today is a sign that Republicans in Congress and their counterparts in the media are accepting that to avoid the fiscal cliff, the government will have to raise taxes on someone.

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Currently over 95% of Warren Buffet’s income comes from Berkshire Hathaway. So his income is first taxed at the corporate level (35%) then he pays (15%) on any dividends he takes (dividends come from after tax profit so that is why we include the corporate tax in what he pays). So his effective tax rate right now is 50% on most his income.

IF Washington raises the personal tax rate it will effect less than 5% of his taxable income which is no big deal BUT if the tax rate on dividends went up by another 20% to 35% then he would be paying 70% of his income in tax when he takes dividends (35% corporate + 35% Dividend).

They could raise the personal tax rate to 90% and it won’t effect Warren Buffett. The only thing that effects him is what the dividend and corporate tax rate does. So he’s not arguing for higher taxes on rich people like himself…he is being disingenuous when he does not include the taxes his corporation pays as taxes he is paying because if his corporation did not pay a 35% corporate tax the pre tax dividends he would receive as income would be 35% higher.

Currently over 95% of Warren Buffet’s income comes from Berkshire Hathaway. So his income is first taxed at the corporate level (35%) then he pays (15%) on any dividends he takes (dividends come from after tax profit so that is why we include the corporate tax in what he pays). So his effective tax rate right now is 50% on most his income.

IF Washington raises the personal tax rate it will effect less than 5% of his taxable income which is no big deal to him because he only takes about a 100K/yr salary… BUT if the tax rate on dividends went up by another 20% to 35% then he would be paying 70% of his income in tax when he takes dividends (35% corporate + 35% Dividend).

They could raise the personal tax rate to 90% and it won’t effect Warren Buffett. The only thing that effects him is what the dividend and corporate tax rate does. So he’s not arguing for higher taxes on rich people like himself…he is being disingenuous when he does not include the taxes his corporation pays as taxes he is paying because if his corporation did not pay a 35% corporate tax the pre tax dividends he would receive as income would be 35% higher.

Currently over 95% of Warren Buffet’s income comes from Berkshire Hathaway. So his income is first taxed at the corporate level (35%) then he pays (15%) on any dividends he takes (dividends come from after tax profit so that is why we include the corporate tax in what he pays). So his effective tax rate right now is 50% on most his income.

IF Washington raises the personal tax rate it will effect less than 5% of his taxable income which is no big deal to him because he only takes about a 100K/yr salary… BUT if the tax rate on dividends went up by another 20% to 35% then he would be paying 70% of his income in tax when he takes dividends (35% corporate + 35% Dividend).

They could raise the personal tax rate to 90% and it won’t effect Warren Buffett. The only thing that effects him is what the dividend and corporate tax rate does. So he’s not arguing for higher taxes on rich people like himself…

Most of Warren Buffet’s wealth is in Berkshire Hathaway. When he takes dividends from Bershire he is first taxed at the corporate level (35%) then he pays (15%) on any dividends he takes (dividends come from after tax profit so that is why we include the corporate tax in what he pays). So his effective tax rate right now is 50% on any dividends he takes from his company.

IF Washington raises the personal tax rate it will effect less than 1% of his wealth which is no big deal to him because he only takes about a 100K/yr salary… BUT if the tax rate on dividends went up by another 20% to 35% then he would be paying 70% of his income in tax when he takes dividends (35% corporate + 35% Dividend).

They could raise the personal tax rate to 90% and it won’t effect Warren Buffett because he can always pay less by taking dividends. The only thing that effects him is what the dividend and corporate tax rate does. So he’s not arguing for higher taxes on rich people like himself…

If they made me Emperor I’d take 95% of his wealth in tax the first year and 95% of the rest every year thereafter. I’d have him wearing a apron at the entrance of some big box store. What a hypocrite. You know he is a tax avoider.

Exactly what I expect to hear from a company dedicated to making the rich richer. I hope the “fiscal cliff” happens to you and all your cohorts. It will cause some pain in the short-run, but the long-term benefits to the economy will far outweight the temporary damage. And if it means that you have to finally pay your way, it’s about time!

There are massive numbers of people in all economic brackets that are not paying their way and a shrinking number of us paying everyone else’s way. It can’t work in the long run.

This phrase from the article should worry a lot of people in the middle class: “but ‘we have to raise taxes’ as well, and the highest-earning Americans are the best place to start.”

The pivotal word is START. There’s nowhere near enough money to be gotten from those making more than $250,000. It won’t take long to push that ceiling down while continually raising the floor up. Who’s in the middle?